Davoudi, speaking at the end of a three-day visit by a Syrian delegation led by Prime Minister Naji al-Otari, also underlined political ties between the two countries.

Cooperation between the two Middle East states, and their support for Hezbollah among other things, angers the United States which says the Lebanese group is a terrorist organisation.

"The (agreement) on preferential trade tariff can bring about a jump in product trade between the two countries," said Davoudi without giving details on which goods would be affected. He also did not say when the deal would be implemented.

Davoudi said trade in products was now about $300 million a year, while tourism exchanges generated about $500 million.

Iranians travelling to Syria account for most of the tourism business as Syria is the venue of a revered Shi'ite shrine visited by thousands of Iranian pilgrims each yaer.

Davoudi said the two sides had begun talks on setting up a joint commercial bank to help the growing bilateral business.

Iran, the world's fourth largest oil producer, is under U.S. and U.N. sanctions over its disputed nuclear work, making it increasingly difficult for Iranian businesses to finance trade through international and especially Western banks.

"One of the most important points raised in this meeting was the question of a joint bank which has been approved by the Syrian government," Davoudi said. "We hope that establishing this bank will pave the ground for improving ties."

Davoudi said Iran planned to enhance its presence in the Syrian energy sector by building a refinery in that country in association with Venezuela and Malaysia.

The Iranian vice-president also said the two sides discussed political ties, and shared views on the Palestinian issue.

"In addition to (this trip's) contribution to the two countries' economic ties, it had political characteristics and importance as well," he said.